Consumer Smarts: What to do if the debt collector calls

PHUONG CAT LE, P-I REPORTER

Published 10:00 pm, Monday, April 16, 2007

Vinh Nguyen of Auburn thought she had cleared up her identity theft problems from three years ago until a debt collector recently came knocking. The company wanted the 61-year-old woman to pay for an old credit card debt that she wasn't even aware she had.

When her son looked into the matter and called the original credit card issuer, he found out that the bank had discharged the debt. But, somehow, it was now being taken up by another collection agency.

Q: Is there a statute of limitations on collecting an old debt? How do I dispute a debt, and what are my rights?

A: If you owe a legitimate debt, debt collectors may contact you to collect it but they can't collect a debt after a certain time limit. Laws differ state by state, but in Washington "they have to bring an action within six years," said Shannon Smith, an assistant attorney general.

Old debts are turning up with greater frequency as more companies are getting into the business of buying charged-off credit card accounts for pennies and pursuing them.

According to the Federal Trade Commission, these "time-barred" debts are "so old they are beyond the point at which a creditor or debt collector may sue you to collect."

However, many courts have ruled that the federal Fair Debt Collection Practices Act "does not prohibit debt collectors from trying to collect time-barred debts, as long as they do not sue or threaten to sue you for the debt.

"If a debt collector sues you to collect a time-barred debt, you can have the suit dismissed by letting the court or judge know the debt is, indeed, time-barred," according to the FTC.

For the 12-month period ending last June, the average individual debt collector brought in nearly $655,162 in gross collections, according to Kaulkin Ginsberg, an advisory firm in Bethesda, Md. The study of 22 companies found they averaged $26 million in total revenues.

Last year, the Washington state Attorney General's Office received 1,307 complaints about collection agencies, ranking that category third in complaint activity.

The bottom line: Know your rights. Federal law prohibits collectors from engaging in unfair, deceptive or abusive practices. Two things to remember:

If a collection agency calls you, tell it to send a notice of what the debt is, how long ago you incurred it and the amount owed, Smith said. Request the information in writing.

If the debt isn't yours, dispute it in writing. The collection firm must stop contacting you until it validates the debt.

You also can stop a debt collector from contacting you if you send a letter asking it to do so. Make sure you send it by certified mail and keep a copy. That letter doesn't make the debt go away if you actually owe the money.

You may have a moral obligation to pay, but the debt collector can't sue you for that debt after six years have elapsed.

The collector can contact other people about your debt, but only to find out where you live, what your phone number is and where you work. Collectors usually are not allowed to contact these people more than once, and they can't tell them that you owe money.

As well, they can't threaten to take your home or garnish your wages, unless they have a court judgment against you, Smith said.